ES Pre-Market Analysis 10-1-2015

Today I’m just writing about something I hear all too often that makes me do a double take. That something is when I hear traders say “You Can Never Go Broke By Taking Profits.” Now on the surface a new trader may hear this and repeat to others like they have some sort of wisdom. I hear this and say its not 100% true.

Let me tell you a story about a trader who took profits all the time. He would take 1 point, 2 points, 3 ticks and sometimes 5 points or more. He would take profits and you would think hey that guys doing great, he believes in “You Can Never Go Broke Taking Profits.” Yes he did TAKE profits; but did he MAKE profit.

Let me continue, see this trader I talk about made profit the same way a business makes profit day in and day out. A business makes a sell and the trader closes a winning trade “CHI CHING!” Cash in the register for the business and cash in the account for the trader. If that was the end of it all traders and businesses would be rich. Ask yourself if they are making profit then why aren’t they all rich. The answer is simple…are you ready? EXPENSES!! That’s right, expenses are what the businesses and traders incur every month. The traders expenses I’m talking about is not his rent or internet bill or car note, it is his losses. Exactly, trading is a business and in business your income/profit has to be more than your losses/expenses.

The trader made what he considered “profits” when he closed a winning trade but he was not profitable at the end of the month. Why? Because his losses was greater than his “profits” so at the end of the month he had no profits. He would take $50, $200, $75 and whatever he could from a trade but his losses would be $200 $500 and sometimes $1000 or more per trade. He would lose in 1 trade what “profit” he did make for a whole week or 2 so at the end of the month this trader would be in the red and lost money for the month. So when I see “You Can Never Go Broke By Taking Profits” in chat room, on Twitter or Face Book or in a text somewhere I would tell the new trader or professional trader, “As Long As Your Profits Is Greater Than Your Losses”

Done Trading 10:30 am With Profits

I was up early as usual starting the trading room at 7:30 am EST and the markets started to move in the pre-market. I took a few trades in the pre-market session and some after the open at 9:30am EST. By 10:30am I had made a few dollars and was done for the day. Off to be with family, friends, the beach or wherever I want to be. Trading gives me the freedom to have more time for things that matter and what I WANT to do and not what I HAVE to do (and the potential to grow my account size). Happy Trading!

Coming Back After Being Down

I got shaken out a little early in the trading day as it will often happen to us traders that is trading small contracts (as of now I am trading 1 or 2 contracts at a time). As the day went on I waited for the setups to happen. There was a big dump I didn’t catch so I waited for the pullbacks, the continuation down and worked my way back into the green with some profits. Watch the live trading session to see how I did it.

Making up losses

First let me say that I was trading AH (After Hours). I usually don’t trade these hours because of light volume which can cause gaps and spikes or no movement at all. I saw a setup where the ES was below 2100 and I thought what a good short it would be if it dumped, after all 2100 is a big psychological number- go long over 2100 and go short under 2100 is my mindset. Makes sense but it didn’t work out that way and I was stopped out by a spike that rallied 4 points or $200 (it could also have dropped 4 points in my favor). So today I was in the markets making up the losses instead of making fresh profits today.

Targets Not Getting Hit

Today seems like my targets was too far and the price was not making any pops. For a trend trader this would have been a good setup but for a momo trader like me, most of the time I like to be right or right out (notice I didn’t say all of the time). If I am up a point and half to two points in the green, I will more times than not take a +1 tick break even trade and not let the trade turn into a losing trade.

The trend is your friend is true in trading. You will find that there is major and minor trends on smaller time frames within major and minor trends within higher time frames. Today showed me that the smaller time frames was not in control (1, 5 and 15 min). The market ran up overnight due to Greece and the IMF coming to an agreement over Greece debt. In this type of environment it was hard psychologically to go long on such an extended rally and so the brain thought short short short but the market gave little room for downside and alot of room to get stopped out. Happy Trading